How to Rip off Mug Investors

 

Anyone who has any familiarity with, or has been following the Heritage Wine fiasco would have been shocked and appalled at the prices that Heritage paid to purchase much of their wine inventory. Bear in mind, this wine was theoretically purchased on behalf of their valued clients/investors whose interests they were supposed to be looking after.

 

Once Heritage went to liquidation, those prices became a matter of public record. What is not on the public record is from whom Heritage purchased all that wine from. In the inventory, there were large quantities of many respected wineries products; names like Binder, Mitchell (Kilikanoon), Balnaves etc; all wineries that have impeccable business reputations.

 

I am willing to bet, that if I rang up almost any major winery and said I wanted to buy two thousand cases of their wine, I would get it at wholesale. And due to the volume taken, possible an additional discount could be negotiated. Yet, when you have a look at the amount that Heritage paid for much of their wine inventory, it is the retail price, and in some cases a little higher. Were they insane paying that much for wine on behalf of their clients? No way!

 

Here is what I am willing to bet has happened in some of these cases. Heritage would approach a winery and negotiate a good commercial deal, ensuring the wine was priced at wholesale, or possibly even below wholesale. That’s not surprising; I have heard from some of the involved players, that Heritage was prepared to pay “up front” – well before the wine was ready for bottling, let alone released for sale.

 

When it came time for the winery to invoice the goods, Heritage would ask the winery to make the invoice out to a “ABC” Company. The winery would receive their money and they were happy. “ABC” company would then sell the goods at a (substantial) profit to Heritage and that’s probably how they came to pay retail prices for so much of the inventory.

 

The big question is who owned “ABC” – the middleman in the transaction. There could have been big money made here, money that was ripped off from the unsuspecting investors/customers of Heritage. It doesn’t take “an Einstein” to work out that the owners of “ABC” would have either been the owners of Heritage or very closely associated with them.

 

If this happened (and the chances are it did,) is it illegal? I don’t know, but it was certainly immoral and unethical. Let’s hope the liquidators can get the people responsible to account, but given the situation, I won’t hold my breath.

 

PS – The title of this snippet does not refer to my thoughts on the Heritage investors, it refers to Heritage’s attitude towards its customers.

 

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Copyright © Ric Einstein 2007